Botswana and the AfDB
Cooperation between the African Development Bank) and Botswana dates back to 1972. As of October 2012, the Bank had financed 50 operations (41 loan projects, seven institutional support operations, and two studies) valued at approximately US $2.1 billion. Bank-funded projects are primarily in the areas of infrastructure (power, transport, water and sanitation, communication), agriculture, finance and multi-sector. The Bank Group Strategy for Botswana spanning 2009-2013 is focused at supporting actions to expand private sector investment and improved infrastructure development to enhance competitiveness and growth.
Botswana’s economy has maintained commendable high rates of growth averaging over five per cent from independence in 1966 through 2008, propelled by exports of diamonds. The remarkable performance was interrupted by the global financial crisis of 2008/09, but it has rebounded strongly, recording GDP growth rates of 7.0 per cent and 5.1 per cent in 2010 and 2011, respectively. The high rates of growth reflect the country’s prudent economic policy management and recovery in world demand for diamonds, the major export commodity. Although Botswana is experiencing high inflation rate above the Bank of Botswana’s objective range of three to six per cent, improved food supply, persistent low domestic demand, and robust monetary policy are among factors behind its downward trend from its highest level of 9.2 per cent in December 2011 to 7.1 per cent in September 2012.
Botswana’s economic outlook in the medium term is largely dependent on the world demand for diamonds, which accounts for over 80 per cent of its total exports and around 30 per cent of Government revenue. Following the ongoing financial crisis in the euro zone and slow growth in Asian countries, demand for diamonds has slowed down leading to lower than expected production of diamonds. To this end, GDP growth in 2012 is expected to moderate to around four per cent, before increasing over the medium term to around 4.5 per cent through 2015. The planned relocation of De Beers’ diamond-sorting and sales activity from London to Botswana by end-2013 is expected to boost economic activities, especially exports of polished diamonds. Inflation outlook is expected to moderate ranging slightly above the Bank of Botswana objective range, aided by demand restraint underpinned by fiscal consolidation, especially on public sector wages.
Botswana’s economic recovery will also rely on successful implementation of National Economic Diversification Drive (EDD) Strategy 2009-2016. The EDD strategy intends to diversify Botswana’s sources of economic growth and income such that the country becomes more dependent on all sectors of the economy, characterized by product and market diversification. The EDD strategy is anchored on seven thematic areas encompassing all spheres and drivers of the economy, with the private sector expected to play a major role in transforming the economy.